Comments on: Austerity’s inauspicious historical precedents A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: Curmudgeon Wed, 23 Feb 2011 17:11:05 +0000 It would be interesting to learn if the fiscal state of the government prior to the crises matters (ours, and those of the several EU economies, were pretty poor to begin with). Is it the initial state that causes post-crisis issues with austerity?

The same might apply to US states. Places like CA, IL, and NY were in pretty bad shape to begin with, and seem to be getting worse. Others, not so bad.

By: TFF Wed, 23 Feb 2011 17:03:35 +0000 y2kurtus, we’ve been starvation-funding public education for at least the last 20 years (personal experience with shrinking budgets in multiple districts). Meanwhile, Medicare costs continue to escalate faster than inflation, even on a per-individual basis.

I dunno which is more valuable to our society’s future, but the above attests to which one has the stronger voting constituency.

By: y2kurtus Wed, 23 Feb 2011 16:44:09 +0000 When trying to chose the least bad option it makes sence to think about who you wish to place at a comparative advantage and who you place at a comparative disadvantage.

All wealth is created through use of natural resources via the productive economy. Those who perform useful work should and must be compensated. Those who invest rather than consume should and must be compensated.

To maximize the economic benifit of a population as a whole we must specifically try and maximize the benifits that flow to workers and investors. In a global economy the best and the brightest workers move at will and they take their capital with them.

I imagine the goverment spends roughly equal amounts on 1 year of grade school for a 7 year old and one hip replacement for a 70 year old. Both are noble endevors and in utopia both would be fully funded. In the world where scaracity of resources is the reality which use of goverment funds returns the larger benifit to society?

By: TFF Wed, 23 Feb 2011 15:44:48 +0000 A year or two ago, I read a suggestion that recessions are essentially a mechanism for “wealth destruction”. No matter how they play out, you end up with (on a real basis) lower profits, lower wages, and lower asset values than you had at the beginning. Moreover, it was postulated that this is a necessary economic correction from time to time. A recession/depression will continue until an sufficient amount of wealth has been destroyed, leaving room for growth to occur.

Two implications of this idea:
(1) The various government programs to support the economy and support the housing market may soften the crash, but in doing so they also drag it out.

(2) A society must necessarily choose between deflationary wealth destruction (in which the capitalists retain a greater portion of their wealth than the laborers) or inflationary wealth destruction (in which the pain is distributed more equally). Of course there are many other ways of redistributing the wealth/pain.

Deflationary recessions have always seemed very destabilizing to me. Inflation isn’t much fun either, but preferable to the alternative.

By: petertemplar Wed, 23 Feb 2011 15:08:29 +0000 Kudos to Felix for not kowtowing to the Peter Peterson Foundation and showing why austerity measures are suicidal.